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Ed Earl Dodd, the sheriff of Gilbert, Texas, has a relationship of long standing with Miss Mona Stangley, who runs a brothel called the "Chicken Ranch" outside of town. Illegal or not, Earl does not interfere with her business, which has been a fixture in the town for as long as either can remember.

Lovers on the side, occasionally interrupted by Deputy Fred, the sheriff and madam have a pleasant arrangement. Not everyone in town approves of her, but Miss Mona is a public-minded citizen who regularly donates to charity, decent and law-abiding in every respect but her line of work.

A big-city television personality, do-gooder Melvin P. Thorpe, is about to do a segment about the town, so the sheriff travels there to introduce himself to Thorpe, who greets him warmly. He is shocked by Thorpe's live telecast, in which Thorpe reveals to a huge audience his discovery that "Texas has a whorehouse in it."

The Chicken Ranch is an institution, where the winning team from the football game between Texas Longhorns and the Texas A&M Aggies traditionally is brought to "celebrate" its victory. The negative publicity puts a spotlight on the place, so Ed Earl gets Miss Mona's word that she will shut the doors until the attention goes away. She shuts it down to regular customers, but elects to let the football players have their party, at which point Thorpe and his TV cameras sneak onto the property and ambush them all.

Earl compounds the problem by insulting and threatening Thorpe in the town public square, all also caught on TV. A quarrel and bitter breakup between the sheriff and Miss Mona ensues, punctuated by him calling her "a whore."

The Governor of Texas, who cannot make a decision on a single issue until he first sees what voters say in the polls, listens to Earl's appeals to keep the Chicken Ranch open, but when the polls say no he orders Ed Earl to close down the Chicken Ranch. The working girls leave the Chicken Ranch for good. Miss Mona is disconsolate, at least until finding out the effort made by the sheriff on her behalf.

As Miss Mona is departing the whorehouse for the last time, Earl stops her and proposes to her. She turns him down, knowing that his dream is to run for state legislature, and that having a wife who worked in prostitution would hurt his chances. He again insists that he wants to marry her and that he does not care about what people will think or say. Deputy Fred, in a voiceover, states that Earl and Miss Mona married and that Earl successfully ran for the legislature. Deputy Fred states that he succeeded Earl as Sheriff.

Originally, Larry King and Pete Masterton were going to write the script and Masterton and Tommy Tune, who had directed the stage production, were to direct the film together. King recommended Shirley MacLaine, Dyan Cannon, Cari Glynn and Jill Clayburgh as the possibles to star but was told they were not a sufficient box office draw.[4]

Reynolds wanted script changes and wanted to sing. Universal became nervous about giving the film to first time directors and ended up replacing Masterton and Tune with Colin Higgins.[4]

Reynolds later said Parton "had two directors fired before we started - they were gone. Because I'd made so many movies and she hadn't, everyone thought it was me. Whether she was right or wrong in those decisions, it was amazing to me that she could do it."[5]

Higgins prepared for directing it by watching old George Cukor films and Dr. Pepper commercials ("They have a lot of wonderful movement," said Higgins.[6])

Reynolds said he suggested to Higgins that Charles Durning be cast. "Colin is very smart, very commercial. They wanted Mickey Rooney, so I manipulated him a little. I told Colin, 'Mickey Rooney is a wonderful actor, but everyone knows that. You won't get any credit. Charles Durning can sing and dance and no one knows it, so you'll get all the credit.' "[5]

The book of the play was restructured to make it a vehicle for Parton and Reynolds.

The plot is basically the same as that of the stage production, with one significant difference. In the original, Ed Earl and Miss Mona had a one-night stand 15 years earlier, but in the film they maintain an ongoing affair.

The relationship in the film brings about not only the accusatory scene, when the sheriff—disappointed that Mona has broken her promise to close the Chicken Ranch down long enough for things to cool off—calls her a whore, but also the happy ending, when he proposes marriage to Mona, even though that might endanger his chances to be elected as a state legislator; the epilogue comments state that he is elected anyway.

Parton and Reynolds were rumored to have had a relationship during filming,[citation needed] but in reality they did not get along.[citation needed] Parton described her experience making the movie as 'a nightmare.'[7] For his part, Reynolds described Parton as 'very self deprecating - in public.'[8]

Much of Carol Hall's original Broadway score was performed in the movie version. Omitted were Good Old Girl, The Bus From Amarillo, "24 Hours of Lovin", "No Lies" and Doatsie Mae. Two additional Parton compositions appear in the film: "Sneakin' Around", performed as a duet with Parton and Reynolds, and a two-stanza version of Parton's 1973 composition "I Will Always Love You". The film version of "I Will Always Love You"—the original recording having been a U.S. country chart topper for Parton in the spring of 1974—was released as a single in July 1982, and again reached number one on the U.S. country singles chart. (It also was a mid-level hit on Billboard pop and adult contemporary charts.) An altered version of Hall's "Hard Candy Christmas", in which Parton sings both the chorus and the verses of the song (as opposed to the film version, which is partially sung by some of the other female cast members), was also released as a single, reaching the top-ten on the country singles chart in late 1982.

Parton wrote several new songs which were filmed but ultimately not used, including "A Gamble Either Way" and "Where Stallions Run". The latter was restored for the ABC network television broadcast of the film, as the film was too short for its time slot after the censors finished their broadcast edits and additional material was needed. "A Gamble Either Way" replaced "Girl You're a Woman" from the Broadway score and was sung by Parton after Miss Mona interviewed "Shy" (Andrea Pike) for a job at the Chicken Ranch. The characters of Shy and Angel from the Broadway show were reduced in the film. Their footage was eventually edited out. "Down At The Chicken Ranch" was written for the trailer. Parton recorded two of the deleted songs, "A Gamble Either Way", and "A Cowboy's Ways" (a reworking of "Where Stallions Run"), and included them on her 1983 album Burlap & Satin.

The film presented some difficulties for Universal, particularly with advertising. In 1982, the word "whorehouse" was considered obscene in parts of the United States, resulting in the film being renamed The Best Little Cathouse in Texas in some print ads, while television ads were either banned outright in some areas, or the offending word was censored; on WXYZ-TV in Detroit, the announcer on the station's "Now Showing" segment merely clicked his tongue to eliminate the offending word: "The Best Little [click, click] in Texas!" During interviews, Parton sometimes referred to the film as The Best Little Chicken House in Texas.

The Best Little Whorehouse in Texas opened in 1,400 theaters on July 23, 1982 and earned $11,874,268 in its opening weekend, ranking number one in the United States box office, dethroning E.T. The Extra Terrestrial's six-week run at the top of the box office.[9] The film closed on October 21, having grossed $69,701,637 domestically.[2]

The film received mixed reviews from critics. On review aggregator website Rotten Tomatoes, the film holds a 56% rating based on 9 reviews.[10]Roger Ebert of the Chicago Sun-Times gave the film two out of four stars, stating, "If they ever give Dolly her freedom and stop packaging her so antiseptically, she could be terrific. But Dolly and Burt and Whorehouse never get beyond the concept stage in this movie."[11]

The house used in the film is located at Universal Studios in Hollywood and can be viewed as part of the backlot tram tour. (It was also seen in the Ghost Whisperer television series episode "The Lost Boys.") The inspiration for the set came from a real ranch house located outside Austin, Texas, which is featured in scenes from the movie.[13]